At Leighton Holdings Limited 39th Annual General Meeting held in Sydney today, Chairman, Mr MA (Tim) Besley AO, announced that the 2000 fiscal period reflected an excellent result for shareholders and provided a strong platform for growth.

Mr Besley said that the record level of work across Australia and Asia had been maintained at the end of the September quarter at $6.3 billion.

“This should translate into an increase in revenue to over $4 billion in the current financial year. Profitability should also increase,” said Mr Besley.

“The success of the Group’s strategy of diversifying by industry, service and geography is reflected in the strong results over the past year.

“Total revenue increased by 7.5% to a new all time record of $3.6 billion and operating profit after tax increased by 10% to $134 million.

“Significant levels of new work won in Asia and the acquisition of John Holland in Australia during the period were key elements in boosting work in hand at 30 June 2000 to an all time record level of $6.2 billion, up by more than 50% on the previous year.

“In an excellent result, profit from the Group’s Asian operations improved by 15% to $55 million before tax from revenue of $772 million,” said Mr Besley.

The total ordinary dividend for the year increased by 10% to 33 cents per share. The final ordinary dividend of 20 cents per share was unfranked and the next interim dividend will also be unfranked. The total dividend payment was $86.7 million which resulted in a payout ratio of 65%.

Chief Executive, Mr Wal King AM, said the outlook for the Leighton Group remains positive with the record level of work in hand maintaining the Group’s momentum. Several large-scale projects are currently being pursued in Australia, which have the potential to further add to an impressive workload.

“Good opportunities exist in the telecommunications industry for the installation of new infrastructure and the operation, maintenance and upgrade of existing infrastructure,” said Mr King. “This industry has the potential to become one of the most significant markets for the Group in the years ahead.

“The Group has a strong presence in Australian and Asian engineering infrastructure markets. Despite the current downturn in activity in Australia, we see this market bouncing back strongly in a year or two, particularly in the transport sector.

“We are currently pursuing some large road and rail projects in New South Wales and expect further opportunities to come forward in other States.

“Thiess again recorded an excellent year in the mining and resources sector, particularly in Indonesia, which still offers good potential. South America also holds promise in the resources sector.

“Leighton Asia completed a record year, coinciding with their 25th anniversary of operations and now have their best ever spread of work, both geographically and by type of work.

“Continued expenditure on infrastructure by the Hong Kong Government and a good level of activity in other Asian countries should continue to benefit Leighton Asia in the future.

“The Group remains clearly focused on organic growth in Australia and Asia, while maintaining a watching brief for complementary acquisitions offering further diversity. A good level of cash has been maintained in preparation for further investment in our business, including the facilitation of major projects”, said Mr King.

ENDS.

Issued by:
Leighton Holdings Limited
ACN 004 482 982

For further information:
Mr Wal King AM, Chief Executive Officer
Ph: (02) 9925 6912

Mr Dieter Adamsas, Director, Finance & Administration
Ph: (02) 9925 6923

Address to Shareholders
A Presentation to the 39th Annual General Meeting of Leighton Holdings Limited by the Chairman Mr MA (Tim) Besley AO

The Group's balance sheet remained strong with no net debt and shareholders' funds 8 percent higher at $661 million.

Leighton's return on shareholders' funds, at 20.3 percent in 1999/2000, achieved a ranking of 15th out of the top 100 companies listed on the Australian Stock Exchange.

This return is around 150 percent better than last year's 10-year bond rate and more than 100 percent higher than the average return achieved by the ASX's top 100 companies.

Australian Operations
A strong contribution was made once again by our Australian operations over the past year.

An overall profit before tax of $112 million was generated from a total revenue of $2.8 billion.

Thiess had an excellent year and remained the largest contributor to the Group's result with record high levels of work in hand, and an increasing diversification of activities.

Leighton Contractors recorded a good performance in 1999/2000 and further progressed strategic restructure plans commenced in the previous year. A number of key initiatives were introduced during the period including the formation of a new subsidiary Vytel Pty Limited through which Leighton Contractors will co-ordinate its expanding telecommunications capability.

In February 2000 the Company finalised the acquisition of a 70% interest in John Holland from Janet Holmes a Court's private family company, Heytesbury. In line with short-term expectations, John Holland delivered a break-even result for the six months to June 2000. A number of steps have been taken to reposition this organisation through the provision of funding and the strengthening of the existing management team. John Holland is now profitable and will be a worthwhile contributor to the Group's results.

Given recent media coverage of an adverse finding against John Hollands in relation to arbitration with Toyo Engineering, I would like to re-assure shareholders that Leighton has no financial exposure what so ever to the settlement. We hold indemnities from Heytesbury covering this dispute and also have bank securities for the amount of the Toyo claim.

Telecommunications continues to be a growing business for the Group and all operating companies recorded good performances in this area. Leighton Contractors is developing two large-scale privatised telecommunications infrastructure projects and is evolving to provide different services as new technology is introduced. Telecommunications contributed 9% of Group revenue last year and has the potential to develop strongly over the next few years.

Engineering and infrastructure remained the Group's largest source of revenue in Australia generating 32 percent of revenue despite a downturn experienced during the period in the Australian civil construction market.

Road projects made up the largest component of work.

Thiess started work on the design and construction of the Kwinana Freeway extension south of Perth while Leighton Contractors commenced on the design and construction of the Inner City Bypass in Brisbane, two contracts on the Melbourne- Geelong freeway upgrade and a busway project in South Brisbane.

A significant achievement for Leighton Contractors during the year was the successful opening of the Eastern Distributor tollroad some eight months ahead of schedule and well in advance of the Sydney Olympics.

Revenue from Building and Property increased over the past year primarily due to the high level of health and defence projects and some major commercial projects undertaken. Contracts secured by Leighton Contractors included management of the new ABC building at Ultimo and construction at St Vincent's Hospital, both in Sydney, and management of the redevelopment of an RAAF base in Townsville. Thiess won design and construct contracts for the Capricornia Correctional Centre and Holy Spirit Northside Private Hospital both in Queensland. Leighton Properties completed and fully leased its landmark office development at 80 Pacific Highway, North Sydney and is currently progressing four new development projects along Australia's Eastern Seaboard.

The mining and resources sector remained a strong contributor with Thiess sustaining an excellent level of work, particularly in the coal sector. Thiess has successfully expanded its coal mining operations over the past few years by driving down costs to the benefit of its clients. New contracts secured by Thiess at a number of mines were supplemented by the acquisition of Hunter Valley Earthmoving.

Work is also progressing well for Leighton Contractors at BHP's Yarrie Nimingarra iron ore mine in Western Australia and at the Coppabella coal mine in Queensland. Thiess Environmental Services had a good year with revenue exceeding $200m and another improvement in profitability. Further acquisitions were made during the year to support and grow this business which recorded its fifth consecutive year of revenue growth.

Asian Operations
In an excellent result, profit from the Group's Asian operations improved by 15% to $55 million before tax, from a revenue of $772 million.

Indonesia and Hong Kong continued to be the major source of revenue and profit.

Thiess Indonesia's operations performed extremely well despite the country going through a difficult period of political and social change. The major highlight being the award of a $778 million coal mining contract for activities at BHP's Senakin and Satui mines in Kalimantan -our largest ever contract in Indonesia.

Hong Kong remained by far the largest source of work for Leighton Asia through government funded engineering infrastructure and housing projects. New contracts won included a joint venture for construction of rail trackwork, engineering infrastructure work at the multi-media Cyberport development and the design and construction of the Australian International School.

Leighton Asia significantly increased its presence in Malaysia during the year winning over $600 million of new work in that country. A contract to build 10,000 apartments for teaching staff across six states is the largest project ever awarded to Leighton Asia.

The largest project being undertaken by Leighton Asia in the Philippines, construction of a retail centre for Rockwell Corporation in Makati City in Manila, has progressed well and is nearing completion.

Leighton Asia's business in Thailand was boosted by the acquisition of a major joint venture contract for rehabilitation of railway track from John Holland Asia. Whilst building work remains very selective, rail maintenance offers some good long term opportunities in Thailand.

South America
Thiess secured its first contract in South America with long-standing client BHP. With three small contracts at the Tintaya copper mine in Peru Thiess is now positioned to participate in BHP's planned expansion in the region.

Dividend
Based on the results achieved in 2000 directors were pleased to declare an 11 percent increase in the final ordinary dividend - up 2 cents to 20 cents per share. This dividend was unfranked and was paid to shareholders on 29 September 2000.

When added to the interim ordinary dividend of 13 cents per share, fully franked at the 36% corporate tax rate, paid in March 2000, the total ordinary dividend for the year rose by 10 percent to 33 cents per share. The total dividend payment was $86.7 million in 2000. The payout ratio was 65 percent.

With a view to ensuring that the Company takes up available deductions at the most effective tax rate we expect that the next interim dividend to be paid in March 2001 will also be unfranked. Subsequently however, subject to the level of our overseas earnings, we expect to return to paying franked dividends in September 2001.

In view of the continuing strength of the Group's balance sheet and its surplus cash position, the Board has decided not to proceed with an issue of shares under the company's share purchase plan in the current financial year. This position will be reviewed again by the Board next year.

Prospects
The new millennium has commenced well for Leighton. The record level of work across Australia and Asia at 30 June 2000 has been maintained at the end of the September quarter at $6.3 billion. This should translate into an increase in revenue to over $4.0 billion in the current financial year. Profitability should also increase.

Investment activity will continue through a number of new project equity commitments, small acquisitions and an expected increase in expenditure on plant and equipment in Indonesia.

Telecommunications and operation and maintenance activities will provide a greater contribution to results in Australia.

Mining will remain a key contributor with the focus on relationship contracting and the provision of integrated, value added services.

Competitive pressure on prices will continue in more traditional hard tender construction markets in Australia. The challenge will be to maintain a reasonable level of work in these markets whilst focussing on securing more profitable management and development projects.

The Group's operations in Indonesia and Hong Kong are expected to have another good year with an increasing contribution from Malaysia.

Negotiations with HOCHTIEF to buy back their 20% interest in Leighton Asia have been finalised subject to receipt of approval from non associated shareholders. Accordingly shareholders, excluding HOCHTIEF and its associates, will be asked later at this meeting to consider a resolution approving the acquisition. If the transaction is approved by shareholders, HOCHTIEF will continue to support the development of Leighton Asia and participate in its profitability through its shareholding in Leighton Holdings. While HOCHTIEF may seek to marginally increase its shareholding in Leighton Holdings there should be no significant impact on the operation of the Leighton Group.

Conclusion
Overall, the Group should continue to create value for shareholders in the medium to long term. Our strategy of diversifying by industry, service and geography is providing record levels of work and some exciting prospects.

Asian markets are also providing a good platform for growth and the continued creation of shareholder wealth.

In conclusion, on behalf of the Board, I would like to thank our shareholders for their continued support. I also express the Board's appreciation to members of the Leighton management team for their excellent work during the year. A recent highlight for the Group was the announcement this week that Leighton Holdings was judged the most highly regarded of the top 100 companies, in the Sydney Morning Herald's Good Reputation Index. The Board's congratulations go to the Leighton team and its leadership for this achievement.

 

A presentation to the 39th Annual General Meeting of Leighton Holdings Limited by the Chief Executive Officer Mr Wal King.

 

As the Chairman has discussed in his address, 2000 has been another very successful year for the Leighton Group and rather than revisit our results I will talk about the factors contributing to that performance and where we see our opportunities in the future.

 

I’d like to talk about the unique characteristics of Leighton, the forces that shape who we are, how we work and our strategy of diversification. I then want to discuss the outlook for the different markets in which we operate both in Australia and overseas.

 

The Leighton Group has a unique structure, with a number of operating companies, each with its own distinct brand and corporate culture. While the structure is not from a management textbook, it does allow the operating companies to pursue their own markets, cultivate their clients and develop their own opportunities. This diversity by company also helps to spread risk and flatten out peaks and troughs in overall performance.  

 

People are critical to our success. The Group employs over 12,000 people, including some of the best in the industry.

 

Our overriding objective is to create shareholder wealth through a keen focus on bottom-line performance and good corporate governance for the benefit of all stakeholders. Our people are rewarded for their performance through an incentive programme which is central to the Group’s success.

 

At the heart of understanding who we are and what we do, are the Group’s core values. They encompass our commitment to provide the highest standards of occupational health and safety, the continuous improvement of our management systems, and our approach to environmental management and social responsibility. These core values provide a common framework for the Group’s companies to operate within and are aimed at maintaining our integrity without compromising our ability to compete.

 

The Group has a particularly strong commitment to observing the highest standards of behaviour and business ethics. We have worked closely with the St James Ethics Centre to implement policies and practices that are achievable. The Board has an Ethics Committee as do each of the operating companies.

 

It was a great pleasure to see this week that ‘The Good Reputation Index’1 ranked Leighton no.1 for its overall reputation as well as no.1 for its ethical performance.

 

Key to integrating our people and operations is information technology. We are currently seeing substantial growth in the electronic transfer of information and are developing our technological and management systems accordingly.

 

The Group is developing its IT capabilities to ensure that technology platforms will support and improve business processes, increase productivity and enhance our edge over the competition. We are also taking an active role in the development of the recently announced Australia-wide, business to business (or B2B) construction industry based internet portal.

 

Size and financial strength are fundamental elements of our strategy and give us competitive advantage. We are able to take equity positions in selected projects to facilitate their development. This demonstrates commitment, ensures a level of control and allows the Group to share in the investment upside on completed projects.

 

Our financial strength also allows us to make selective acquisitions to grow the core contracting businesses. A number of recent acquisitions within Thiess, Leighton Contractors and Leighton Asia boosted our workload and market position.

 

1. The Good Reputation Index, announced on 30 October 2000, was undertaken by The Age and The Sydney Morning Herald newspapers. A key acquisition this year was our 70% investment in John Holland’s Australian business. It gives me great pleasure today to welcome John Holland’s Chairman, Mrs Janet Holmes à Court to our Annual General Meeting.

 

The John Holland name is synonymous with engineering and construction excellence in Australia. They have a great reputation and many experienced people. When the opportunity arose to take a controlling interest in John Holland we saw a good fit with our existing businesses.

 

John Holland provided an immediate boost to our workload. It also expands our contracting business in targeted sectors such as rail, telecommunications, health and process engineering.

 

The addition of John Holland to the Leighton Group has proceeded smoothly and we are delighted that the company has returned to profitability and the outlook is positive. I would like to thank Janet and all of the John Holland people for their support and enthusiasm over the last year.

 

Diversity has shaped and strengthened the Leighton Group. Construction is a core skill but the ability to construct is not what makes the Group unique.

 

Group companies are involved across a number of markets, many of which are by their very nature cyclical. By diversifying into new industry sectors such as telecommunications and environmental services, we have sought to achieve a distinct capability and reputation across a spread of industries whilst mitigating against the impact of market cycles.

 

Today the Group is a major player in each of the five key market sectors that it competes in: telecommunications, engineering infrastructure, mining and resources, building and property, and environmental services.

 

Our core skills continue to evolve to become part of a wider spectrum of services we offer to our clients and partners. The Group now offers a full range of contracting and development services.

 

We still undertake traditional hard dollar contracts. They help to ‘keep our pencil sharp’ and provide the Group with a critical mass of work. These contracts are usually fiercely competitive so our aim has been to move up the value chain where we can apply our skills and financial strength to provide integrated solutions which add value for both clients and shareholders.

 

Our balance sheet allows us to provide seed capital to facilitate projects and attract quality partners. We now have diversified development activities and investments in all of our five key markets. We also provide a range of value-added contracting services across these markets including design management, alliancing and partnering, facilities management and operation and maintenance.

 

Another element of our strategy is geographic diversification.

 

The Leighton Group’s controlled geographic spread began 25 years ago with the move into Asia. Our success has been achieved through our ability to take the skills and expertise learnt in one country or region, and adapt and apply them in another. We now have a broad footprint across Asia and our operations in the region recorded their highest ever levels of profitability and work in hand at June.

 

Thiess’ expansion in Indonesia and its strong relationships with resources companies are now being used as a model to establish operations in South America. Thiess’ commitment to offering clients a whole-of-business approach and support to their global operations will form the platform for its new operations in South America.

 

This diversity by industry, service and geography allows us to offer more comprehensive services to clients. It also spreads risk and opens up new areas of business.